With a $2.46 trillion market capitalization (AAPL) is the world’s most valuable and most profitable technology company. The price of shares of the iPhone maker have soared 11.7% year-to-date and 16.4% over the past three months. This can be attributed primarily to the company’s record high services revenue in its last reported quarter and optimism surrounding the launch of its forthcoming iPhone 13.

As the company continues to make significant investments across all its business segments and launch powerful new generation products, it should witness solid growth in users and maintain a robust financial performance in the coming quarters. In addition, major updates to its iOS 15 to further protect user information and enhance their experience and its strategic launches should help it maintain strong sales momentum.

Closing yesterday’s session at $149.71, AAPL is trading just 1.3% below its 52-week high of $151.68.

Here is what I think could shape AAPL’s performance in the coming months:

Favorable Earnings and Revenue Estimates

Analysts expect AAPL’s EPS to increase 67.1% year-over-year to $1.22 in the current quarter, ending September 2021. Its consensus EPS estimates indicate a 70.1% increase in the current year and a 1.6% increase next year. In addition, AAPL has an impressive earnings surprise history; it beat the Street’s EPS estimates in each of the trailing four quarters.

A $84.58 billion consensus revenue estimate for the current quarter indicates a 30.7% improvement year-over-year. Also, its revenue is estimated to increase 33.4% year-over-year to $366.12 billion in 2021.

Industry Tailwinds

As digital transformation efforts accelerate, with more businesses moving to the cloud while embracing critical capabilities in the areas of data and analytics and artificial intelligence, the technology industry continues to witness significant momentum. Increasing penetration of next-generation handsets, adoption of 5G networking, as well as increased IT spending to support a hybrid working strategy and on-premises systems have attracted large amounts of capital for the technology industry from a growing pool of interested investors.

As AAPL continues to deliver unmatched innovation by investing in powerful new products and introducing new features for its users, it is well-positioned to witness long-term growth across its product categories.

Recent Developments

In June, the company introduced a new watchOS 8, with more essential features, including new workout types, a reimagined Breathe app, a new Portraits watch face, a redesigned home app, and new updates to Messages. In addition, AAPL unveiled new developer tools and technologies, Xcode Cloud, to help build high-quality apps faster using robust cloud services, and new augmented reality (AR) technologies.

Furthermore, the company recently announced major updates in its iOS15 with powerful features, including enhanced on-device intelligence, new privacy controls in Siri, upgrades to Maps, and redesigned browsing experiences. These features should  help AAPL to improve personalized experiences and keep its customers engaged.

Robust Financials and Profitability

AAPL’s total net sales grew 36.4% year-over-year to $81.43 billion in its  fiscal third quarter, ended June 26, 2021. The company’s services revenue stood at $17.49 billion, representing a 32.9% increase year-over-year. Its gross margin came in at $35.26 billion, up 55.4% from the same period last year. In addition, its net income surged 93.2% from its  year-ago value to $21.74 billion, while its EPS increased 100% year-over-year to $1.30. Furthermore,  AAPL’s iPhone sales rose 49.8% year-over-year to $39.57 billion for the quarter.

The company’s 28.8% trailing-12-month EBIT margin  is 231.5% higher than the  8.7% industry average. Also, the company’s trailing-12-month net income margin and levered free cash flow margin of 25% and 23.2%, respectively,  compare favorably with the industry averages. Also, its trailing-12-month ROE and ROA of 127.1% and 26.3%, respectively, are 1,430.2% and 622.5% higher than the 8.3% and 3.6% industry averages.

POWR Ratings Reflect Promising Outlook

AAPL has an overall B rating, which translates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. AAPL has a Sentiment Grade of B, which is consistent with analysts’ expectations that its revenue and earnings will grow.

In addition,  it has a B grade for Quality. This is justified by  the company’s higher-than-industry EBIT margin.

Click here to see the additional POWR Ratings for AAPL (Stability, Value, Growth, and Momentum).

The stock is ranked #21 of 45 stocks in the B-rated Technology – Hardware industry.

Bottom Line

AAPL’s well-diversified growth across all product categories, continued sales momentum, and a loyal customer base should help the company maintain its dominant position in the technology space. In addition, the growing enthusiasm surrounding the upcoming launch of its iPhone 13 should help the stock maintain its rally in the near term. Thus, we think it could be wise to bet on the stock now.

How Does Apple (AAPL) Stack Up Against its Peers?

While AAPL has an overall B (Buy) rating in our proprietary rating system, one might want to check out its industry peers with A (Strong Buy) ratings: Canon, Inc. (CAJ) and Seiko Epson Corporation (SEKEY).

AAPL shares fell $0.25 (-0.17%) in premarket trading Tuesday. Year-to-date, AAPL has gained 13.15%, versus a 20.47% rise in the benchmark S&P 500 index during the same period.

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.

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